Do I Need An Estate Plan?  A Brief Overview

Do I Need An Estate Plan?
A Brief Overview

There is no wrong time to do the right thing. -Charles M. Blow

My father had grown up on a farm, and he was expected to make his way in the world. So he bought a 102-acre dairy farm in central Ohio-the land and everything that went with it. It was a wonderful place to grow up, but it was hard work. And even as a young boy, I was expected to contribute, just as everyone else in the family did. So, every morning before school and before breakfast, I was responsible for feeding and watering our farm animals. They ate and drank before I did. It was the rule at our house.

There were many mornings in a frigid winter darkness, when I'd have to get up before dawn. Walking the gravel driveway to the barn, I could see my breath in the moonlight against the snow.

Leaving a warm bed for that, required some serious motivation. And it wasn't enough to know the cows were hungry. It was my own hunger that really got me out of bed. I was motivated by the desire to eat something before leaving for school.

The alarm would ring, and, grudgingly, I'd get out of bed and pull a light switch. The light announced a new beginning. I'd head to the barn as, slowly, the day settled in towards dawn. I'd take care of my animals-breathing in the musty, sometimes pungent, sweet smell-until I was done and, finally, I could have breakfast. Then, it was off to school.

Like Stephen Covey's quadrant model of how people prioritize things in The 7 Habits of Highly Effective People, my early morning routine was a series of prioritizations. As Covey noted, there are four Quadrants of priority:

The Quadrants

Quadrant 1: Important activities that are urgent;
Quadrant 2: Important activities that are not urgent;
Quadrant 3: Urgent activities that are not important; and,
Quadrant 4: Activities that are neither important, nor urgent.

First and foremost, the animals needed care. They were unable to do without me. The time and quality of their care was critical: Without fail, I had to feed and water them not less than twice a day, and usually at the same hour to give them some predictability from which they would follow a routine and produce for the farm.

In the second quadrant, my breakfast was important, but might on occasion be missed, without consequences, since I could make it up later either at lunch, or running out the door with some tidbit. At some time, though, I would need to eat.

In the third quadrant, my observations of my environment, the cold air and my breath in the moonlight, the rising sun, could only be observed at that early hour. However, if I'd missed them, likely it would not meaningfully have affected the day's progress, or life thereafter.

In the fourth quadrant was my coming to terms with the existence of morning and the end of sleep. Burrowing myself under the covers for a few extra minutes may have felt good, but it had no impact on my day or anything else. (Unless I made myself late for school.)

Life is like this, and Covey gets this right in describing how we work.

In this quadrant model, things that are in Quadrant 1 get done. However, estate planning typically falls in Quadrant 2 or Quadrant 4. Most people know it's important, but it doesn't seem urgent enough to act. So they don't feel like turning on the planning switch just yet. It's on the "to do," list, but it's so far down, that they never actually get around to it. Still others, like Alice in the previous chapter, don't even see why they should bother at all.

How then, do we make the shift, and realize that estate planning should be a Quadrant 1 activity-something that is both important and urgent?

By realizing that estate planning isn't about the end of life decisions. It's about maintaining one's present. And every day you spend without it, you put your present in jeopardy.

What Is An Estate Plan?

What Is An Estate Plan?

As we saw in the case of Alice, many people mistakenly believe that estate planning is just about dividing up property between inheritances. (And that does seem like a Quadrant 4 activity, doesn’t it? Who wants to give their things away? If you just bought that car, and are still enjoying the new car smell, why would you rush to think about giving it away?)

However, that conception of estate planning is fundamentally wrong.

In fact, there are actually two main aspects to estate planning: life planning and death planning. A good estate plan should address both, while tailoring this plan to your personal priorities and circumstances.

In Life Planning, the focus is on considering how you want your care to be handled in the event of your physical or mental incapacity. It also involves managing your assets in life to avoid unnecessary risks, and possible loss of property to claims. It’s giving someone the power to mind your investments, make financial decisions on your behalf. (Even let someone access your checking account, so that they can write a check for your new car payment, if you’re not able to.)

For parents, life planning is the most important thing of all. It is your plan to handle the care of any minor children, if you become unable to provide for them through illness or other infirmity.

Death planning involves how you want your estate to be handled in the event of your death. Commonly, clients consider this taken care of through a will. However, there are other legal options that can be more effective, depending on the circumstances. For example, a family trust may protect an estate with significant assets from estate tax issues, but another advantage of a trust is that it can also protect immature adult children from themselves—preventing them from wasting their inheritance, or it may allow for retention of estate assets in a particular line of the family for blended families. But even these “death plans” still relate back to how you control your assets during your lifetime as well.

Once someone has decided their goals, these plans come into being through various legal structures and documents. The exact nature of these will depend on the jurisdiction or state you or your family live in, as well as any other states where you own property.

Think of it this way. It’s almost a given that companies will adopt a corporate or limited liability structure to protect their owners from liability. In a similar way, there exist legal structures that can protect families and their assets. Sometimes, it doesn’t take much more than signing a few forms. In other cases, it may be more complicated. But it’s worth it.

For example, when you bought a house, you were probably focused on the closing escrow and financing, but to keep the home in your family, the name on the deed may make all the difference. As we’ll discuss further on, how the owners’ names are recorded on a title or deed can change how long someone may live there, who can inherit or sell the property, and how your family can inherit the property and manage it.

Some estate planning documents may be prepared by a client without the assistance of a lawyer; however, many of these documents tend to be highly technical, and even a typo or comma can render them altered from the original intent, or in some cases null and void. Therefore, it is important to have a lawyer have review all documents so that you understand their legal significance, and for peace of mind. An attorney can also check for any possible errors and make sure the documents fit into your larger plan, including your estate planning documents.